ISLAMABAD: The National Electric Power Regulatory Authority (Nepra) on Thursday gave in to a demand of the Power Division to impose for 12 months an additional special surcharge at a flat rate of Rs1.52 per unit on all K-Electric consumers, except lifeline category with less than 100 units per month on a permanent basis.

The additional surcharge will come into force from Dec 1 for up to November 2024 and provide a Rs24.5 billion financial cushion to the federal government which claimed to have extended Rs416bn subsidy to KE during the past five years and had budgeted another Rs298bn for 2023-24, taking the total toll to Rs714bn in six years.

Power Division said the government had also allocated Rs678bn subsidy for other distribution companies (Discos) for the current year.

This additional surcharge is on top of an average Rs32 per unit uniform national base tariff, Rs3.23 per unit financing cost surcharge and various taxes and duties besides the quarterly tariff adjustments and fuel cost adjustments that keep on changing on a quarterly and monthly basis.

Nepra “has decided to allow the subject motion i.e. recovery of Rs1.52/kWh from the consumers of K-Electric, except lifeline, for 12 months from December to November 2024”, said an order issued by the regulator while conceding some flaws in the Power Division’s tariff petition that had been approved by the Shehbaz Sharif cabinet but certain changes made unilaterally by the Power Division. While the regulator highlighted such legal questions but did not give a ruling.

Move to extract additional Rs24.5bn from Karachiites starting Dec 1

It said the Power Division claimed that the cabinet had “approved the recovery of Rs24.5bn through the imposition of a surcharge of Rs1.52/unit in 12 months, without specifying the consumer categories.

However, keeping in view the socio-economic policy of the federal government and tariff-setting practice, the surcharge is not applied to lifeline consumers.

“Not only this, the Power Division also made a legal confession that “the Schedule of Tariff (SoT) annexed with the motion, a typographical error has occurred, which needs rectification because as a matter of policy, lifeline consumers are never charged surcharge, QTAs or FCAs”. Interestingly, the same SOT was also approved by the cabinet but the Power Division on its own produced a revised SoT.

Nepra also noted the Power Division’s declaration that no subsidy had been budgeted by the Finance Division in any year, for the abovementioned amount and the surcharge would be used for payment of the power producers (Rs1.671 trillion) and Power Holding Ltd (Rs765bn) outstanding as of Sept 30, 2023.

It was reported that KE’s average tariff determined by Nepra stood at Rs43.04 per unit while the applicable tariff amounted to Rs32.23 per unit and hence the federal government was already picking about Rs10 per unit as tariff differential subsidy. With the new surcharge, the applicable tariff would be Rs33.75 per unit on average for KE.

According to the Power Division, the new surcharge was meant for a part recovery of cost duly determined by the regulator during the years 2019-22 but blocked by KE through stay orders for 3-4 years. It said the outstanding amount against unrecovered quarterly adjustments from KE consumers for 2019-22 period was around Rs175bn but only Rs24.5bn would be recovered by the imposition of a surcharge.

Interestingly, the Nepra members had questioned during the public hearing the contradictory position and the legality of the verbal statements of the Power Division team or the documentary record of the petition.

Published in Dawn, November 24th, 2023